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Business, 15.10.2020 09:01, mariap3504
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $27.80 per unit, while product B has been assigned $13.23 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost Pools Activity Costs Cost Drivers Activity Driver Consumption
Machine setup $360,000 Setup hours 4,000
Materials handling 85,000 Pounds of materials 17,000
Electric power 50,000 Kilowatt-hours 25,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A B
Number of units produced 4,000 10,000
Direct materials cost $39,000 $38,000
Direct labor cost $22,000 $27,000
Number of setup hours 100 200
Pounds of materials used 2,000 2,000
Kilowatt-hours 2,000 4,000
Required:
Use activity-based costing to determine a unit cost for each product.
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Answers: 2
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